Baugur Steps Up Global Push After Disposals Raise £430m Takeover Fund

Baugur, the Icelandic investor that owns a swath of the UK high street, is poised to step up its global expansion after raising a £430 million “war chest” yesterday.

The company sold its media and technology interests and its stake in FL Group, the Icelandic investment business, in two separate deals to focus exclusively on retailing.

Baugur, which is already linked with potential bids for Saks, the American department store business, and Moss Bros, the British menswear retailer, said that it wanted to take advantage of opportunities created by the fallout from the credit crunch.

Its move comes after mounting speculation that Baugur’s finances could be under pressure from recent rating downgrades for Iceland’s three leading investment banks and a sharp increase in interest rates in its home country. Baugur has also suffered a sharp fall in the value of its retailing investments in the UK, with more than £100 million wiped from its stakes in retailers such as Woolworths, Debenhams, French Connection, Moss Bros and Booker last year.

However, Gunnar Sigurdsson, the chief executive of Baugur, insisted that the group was in good health and was looking to grow not only in the UK, but also the US, China and India.

Mr Sigurdsson told The Times: “There has been a lot written about Iceland and Baugur recently, with people drawing conclusions about the difficulties we may be facing. They are way off the mark. We have a great portfolio of brands and are very well placed in the market.”

He added: “This builds our existing war chest, which will allow us to take advantage of investment opportunities that will arise in the current market conditions.”

Baugur acquired a string of media and technology interests after being founded by Jon Asegir Johannesson, the chairman, and his father in 1989.

In addition to the Teymi telecoms and IT group, Baugur owned Humac, a company with distribution rights for Apple across Iceland and Scandinavia, and 365 Media, home to freesheet newspapers and television and radio stations.

Stodir Invest, a newly formed company that is understood to count Mr Johannesson as an investor, bought the media and technology assets yesterday. Another new firm, Styrkur Invest, bought the stake in FL Group.

Baugur last year announced its intention to be the world’s largest retail investment group by 2012 and it has already begun to take some of its leading UK brands on to the international stage. Hamleys, Baugur’s first UK acquisition in 2003, has a store in Denmark and is to open in Dubai this year. It also operates concessions in some House of Fraser stores. Baugur bought House of Fraser two years ago.

Mr Sigurdsson refused to comment on a potential move for Saks, the department store chain, in which Baugur took an 8 per cent stake last year. However, he said: “That was our first foray into the US and we will continue to look for opportunities there.”

Yesterday’s disposals mean that more than 70 per cent of Baugur’s operations are now based in the UK.

Richard Hyman, an independent retail analyst, said that yesterday’s disposals were “prudent” and left Baugur in pole position before what was likely to be a wave of consolidation in the retail sector in the coming year. He said: “There are opportunities for people like Baugur and they are in a great position to really be a major player internationally, and probably to be the major player in the UK market.”

Shopping basket

What Baugur owns in the UK

Fashion Mosaic Fashions (Karen Millen, Oasis, Warehouse, Shoe Studio Group, Principles, Coast, Odille), Whistles, Jane Norman, MK One, All Saints

Food Iceland, Booker, Julian Graves, Whittard of Chelsea

Department stores House of Fraser

Speciality Aurum (Goldsmiths, Mappin & Webb, Watches of Switzerland), Hamleys, Wyevale Garden Centres

Listed investments Debenhams (6.7 per cent), Moss Bros (29.2 per cent), French Connection (20.9 per cent), Woolworths (12.4 per cent)

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